Current Trends in the Overall U.S. Weight Loss Market

Reprinted with permission. The following information comes from Marketdata.

2009 & 2010 Performance and Emerging Diet Trends


Marketdata / BestDietForMe.com analysts have noticed several trends emerging in the overall weight loss market, as we entered the 2010 “diet season”.

Our preliminary estimate of the total weight loss market, as of early January 2010, was that the market was expected to be valued at 59.7 billion in 2009, up less than 2%. This is compared to 58.6 billion in 2008.

We expect that total market growth in 2010 was also less than 2%, as the recovery has progressed slowly.

Currently, Weight Watchers seems to be the big winner among commercial programs. It is “hitting on all cylinders”. Revenues for the full year 2010 were up 3.5% to 1.45 billion, versus the prior year. The WeightWatchers.com business, which continued to strengthen throughout the year (total 238 million in 2010), and improved NACO meeting business performance in the last nine months of fiscal 2010 drove the revenue increase. Apparently, during the recession, a less costly online program resonated well with dieters, coupled with a strong ad campaign featuring actress Jennifer Hudson, who looks great after her weight loss success.

A major revamp of the program, to the new Points Plus program, increased interest among consumers and resulted in a lot of product sales related to program materials, etc.

NutriSystem was not so lucky. A weak January, coupled with its diet season launch not doing well because of competition (from Weight Watchers) and bargain-hunting consumers produced results that were well below Wall Street expectations.

Revenue for the three months ended Dec. 31 slid 17% to 87.9 million from 105.5 million. This missed Wall Streets 100.6 million expectation. Annual revenue dropped 3% to 509.5 million from 524.6 million.

One major development that helped the commercial programs last year and early 2011 was the FDA’s rejection of new prescription obesity drugs, most recently the denial of Contrave by Orexigen Pharmaceuticals. So, there is no magic diet pill coming onto the market in 2011.

2010 Estimates

• We expect the economic recovery to be slow and gradual.

• We think that do-it-yourself diet plans such as diet websites, diet books, mail order and infomercial programs and products, and meal replacements (bars, shakes) and OTC diet pills/appetite suppressants will continue to do well, at least during the first half of this year. They are inexpensive and easily obtained, as well as being heavily advertised. This should benefit brands such as Slim-Fast (Unilever) and Herbalife.

• High-priced structured commercial diet programs such as Jenny Craig will continue to struggle.

• Don’t expect to see any new prescription obesity drugs to enter the market in 2010. There are three obesity drugs in late stage clinical trials that will apply for FDA approval this year, but they won’t make it to market for consumers until 2011. This Marketdata forecast was borne out by the FDA’s decision July 15th not to approve the drug Qnexa, by Vivus, due to concerns over possible side effects. There are two more FDA advisory committee meetings planned for new obesity products this year for Arena Pharmaceuticals (Nasdaq: ARNA) lorcaserin in September, and for Orexigen Therapeutics (Nasdaq: OREX) naltrexone/bupropion (Contrave) in December.

• Marketdata analysts expect to see continued discounting of weight loss programs. Initiation/registration fees will be lowered or waived in most cases, along with more free food offers (example: 2 weeks of free food per 4-week cycle for NutriSystem and Medifast). We will also probably see more coupons and the waiving of shipping charges (example: eDiets Meal Delivery now offering free shipping for life).

• We believe that the recession forced many consumers to trade down to lower-priced foods and more fast food, which is higher in carbs. This, coupled with the consumption of more “comfort food” to cope with stresses of the recession, will probably result in Americans gaining more weight than usual the past two years. As a result, we think that when they do come back to weight loss programs, they will be heavier and have more weight to lose, which should translate into longer tenures with weight loss programs.

• The commercial weight loss programs segment is estimated to have grown only 1.6% in 2009, to 3.5 billion.

• Marketdata analysts expect more consumers to take advantage of employer subsidized health club memberships and weight loss programs. Necessity is the mother of invention, as they say. Many companies offer discounts as high as 50% or more on gym memberships and diet programs like Jenny Craig and Weight Watchers. One example is the 50 million pound challenge, a program sponsored by State Farm Insurance. Some corporate wellness programs such as Blue365 offer professional help as well as discounts. In this plan, participants can receive phone calls or emails to ensure that their weight loss and exercise are on track.

• Marketdata analysts expect to see more weight loss programs popping up in “non-traditional” retail sites, such as the healthcare “mini-clinics found in Walgreens, Rite Aid and CVS drugstore chains. Lindora has experimented with tests in these sites on the West Coast and we think more will follow. Other retail chains such as Target or Kmart could be next in line. Kiosks in shopping malls and in health clubs could be other potential sites.

The point is, the innovative and proactive weight loss companies are not waiting for dieters to come to their weight loss centers. Rather, they are reaching out to consumers where they shop

2009 Performance

Marketdata expects that the recession put substantial pressure on consumer’s budgets and hampered enrollment in the more expensive weight loss programs. Jenny Direct business should grow, while their regular program enrollments are expected to be flat. The cost of Jenny Craig food is still 400+ per month, a drawback for many dieters on a budget.

2009 was the year of a “value diet” and the frugal dieter. We saw dieters shift toward a greater use of free and low cost do-it-yourself weight loss programs (examples: Sparkpeople.com, Weightwatchers.com, eDiets.com and other diet websites, Discovery Health’s Weight Loss Challenge, etc.). Fully 78% of all dieters are do-it-yourselfers today, up from the widely quoted level of 70% several years ago.

In fact, Marketdata’s ongoing online survey offered at it’s website: BestDietForMe.com, shows that the percentage of dieters that prefer a home-based/online weight loss program stood at 78% at the end of the 4th quarter 2009. Since we began this tracking service in 2005, this do-it-yourself percentage has grown steadily, from 59.3% in 2005 to 67.0% in 2006, to 70.5% in 2007 and 75.5% for 2008.

2009 was a very challenging year for all diet food home delivery services. Services catering to the higher end of the market, those charging more than 1,000 per month, may find that their affluent clients in the entertainment industry and high income executives are not as affected by the recession. However, at this price point it will be difficult to expand into mass markets with lower income consumers. Even NutriSystem, which is priced only around 250-300 per month, felt the effects of the recession in 2009 and held prices down.

Competition and heavy advertising was prevalent in 2009. Marketdata expects to see more discounting of weight loss programs. Initiation/set up fees will be lowered or waived in most cases, along with more free food offers (example: 2 weeks of free food per 4-week cycle for NutriSystem and Medifast). We will also probably see more coupons and the waiving of shipping charges.

Retail diet pills/products sold in stores, by mail order, over the Internet, and by TV infomercials were popular. Several new products appeared on the scene in early January: Zylotrim, Lypozene, Ephedra/Hoodia Fusion.

The market for prescription diet drugs came under pressure as more consumers lose health care coverage when they’re laid off. Even those who are still employed have been cutting back on doctor visits, splitting pills, and skipping days of medication lately, as their budgets have been pinched.

More consumers exercised at home, using exercise DVDs, walking in their neighborhood, using the YMCA – designing their own exercise program in an effort to save money. Health club trade associations confirm that gym memberships were down 3% in 2007 and 2008 was expected to be a flat year. Health club chains in the middle price range, such as Bally’s Total Fitness, are having trouble. Bally’s recently filed for bankruptcy for the second time in two years and many clubs report seeing more cancellations. The gym membership is usually one of the first things consumers drop when money gets tight.

Size of the Market


Following are Marketdata’s estimates for the major segments of the U.S. weight loss market: ( billions)

® Figure revised by Marketdata Source: Marketdata estimates and forecasts. Includes low and moderate-cost hospital programs, treatment by RDs, MDs, etc.

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